The rise in atmospheric CO2 is expected to force a rise in temperature and atmospheric vapor pressure deficit (VPD) by the end of the 21st century. For trees, the most relevant allometric component controlling water transport is the ratio of biomass allocated to leaves versus sapwood (AL/AS). Within Pinus, trees decrease ALAS in response to rising VPD. Thus, rises in air temperature and VPD may profoundly alter the water relations of trees and forests. I used stands of ponderosa pine growing along a climate gradient (desert v. montane) in the western United States as a model system to determine the effects these climate-related shifts in biomass allocation on the water relations of mature trees. I found that desert trees, because of larger diameter tracheids in the sapwood, had 37% higher rates of water transport per unit sapwood area than montane trees. The combination of low ALAS and higher sapwood conducting efficiency led to two-fold higher hydraulic conductivity (KL), and thus higher transpiration in desert trees. Desert and montane trees had similar vulnerability to xylem embolism and soil-to-leaf water potential gradients during the growing season. Despite higher allocation to sapwood, desert and montane trees did not differ in their reliance on stored water reserves. Paradoxically, any gain in sapwood water storage capacity through high allocation to sapwood in desert trees was offset by a loss in foliage storage capacity. The primary advantage of high allocation to sapwood in a warm and dry environment is to increase KL in order to prevent xylem embolism induction. A growth chamber study revealed that there were no interactions between elevated CO2 and temperature on water transport. Similar to their adult counterparts in the field, ponderosa pine seedlings reduced AL/AS and had higher KL in response to elevated temperatures and VPD. These results suggest that rising temperatures and VPD may exert stronger influence on tree water relations than elevated CO2 in a future climate. A common garden study showed that although desert and montane populations differed genetically, none of this variation was associated with ecotypic divergence. Thus, differences in the water relations of desert and montane trees may be related to phenotypic plasticity.